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HomeMy WebLinkAbout11 VOLUNTARY WORKFORCE HOUSING INCENTIVE PROGRAM ORDINANCEAgenda Item f1A R �—i Reviewed:AGENDA 1 SPORCity Manager Finance Director MEETING DATE: JULY 3, 2018 TO: JEFFREY C. PARKER, CITY MANAGER FROM: ECONOMIC DEVELOPMENT DEPARTMENT SUBJECT: VOLUNTARY WORKFORCE HOUSING INCENTIVE PROGRAM ORDINANCE SUMMARY: Ordinance No. 1491 proposes to add Chapter 9B to Article 9 (Land Use) of the Tustin City Code (TCC), establishing a Voluntary Workforce Housing Incentive Program. RECOMMENDATION: It is recommended that the City Council: 1. Open and, after public testimony, close the public hearing; and 2. Introduce and have the first reading by title only of the revised Ordinance No. 1491C in the form attached as Exhibit C hereto, adding Chapter 9B to Article 9 Chapter 1, establishing a Voluntary Workforce Housing Incentive Program; and set a second reading for the next regular City Council meeting. FISCAL IMPACT: Ordinance No. 1491 is a City Council -initiated project. There is no direct fiscal impact to the General Fund. Implementation of the Ordinance with an in -lieu fee is expected to generate funds for the City's workforce housing incentive program fund in unknown amounts for use in support of City affordable housing programs and projects. CORRELATION TO THE STRATEGIC PLAN: The Voluntary Workforce Housing Incentive Program Ordinance furthers the objective of the Goal A: Economic and Neighborhood Development, enhancing the vibrancy and quality of life in the community. 1327491.1 Agenda Report July 3, 2018 Page 2 BACKGROUND AND DISCUSSION: On April 17, 2018, the City Council unanimously passed the first reading of Ordinance No. 1491 and set the second reading for June 19, 2018. The Council set a later date for the second reading in order for staff to meet with the Building Industry Association of Orange County ("BIA") to discuss concerns raised by the BIA during the public hearing. On May, 8, 2018, Mayor Al Murray, Councilmember Dr. Allan Bernstein, City Manager Jeff Parker, Community Development Director Elizabeth Binsack, and Economic Development Deputy Director Jerry Craig met with the BIA. In discussing BIA's concerns and recommendations, it was agreed that removing Section B9942(a) of the original Ordinance No. 1491, which proposed to establish a monitoring fee and a plan submittal fee, would be presented to the City Council for consideration. As a result, staff submitted the revised Ordinance No. 1491 for a first reading on June 5. (The version of the revised Ordinance presented for consideration on June 5th is attached hereto as Exhibit D, and is enumerated as Proposed Ordinance No. 1491D.) The Council unanimously approved the introduction and first reading of the revised ordinance on June 5th and second reading was scheduled for the City Council's next meeting on June 19th. At the June 19th meeting, the Council, by a 3-2 vote, directed that additional changes be made to the ordinance to: (1) limit its application only to residential projects that involve a voluntary request for a Residential Allocation Reservation (RAR); and (2) require that all affordable housing pursuant the ordinance be built on-site with the proposed residential project. The revised version of the Proposed Ordinance which would implement the City Council's June 19th direction is attached as Exhibit A and is enumerated as Proposed Ordinance No. 1491 A. EFFECTS AND POSSIBLE ALTERNATIVES: In the process of preparing the revised ordinance to conform to the City Council's June 19th direction, City Staff became concerned that the revised restrictions might have some adverse, unintended consequences. A. Disproportionate Effect on Smaller Projects. Chief among the concerns is that requiring all housing to be constructed on-site could significantly impair the feasibility of smaller projects, even if they are receiving some off- setting RAR value. The ability of smaller projects of less than 20 units to spread the administrative and other costs related to affordable units is significantly more limited than in projects involving more units. 1327491.1 Agenda Report July 3, 2018 Page 3 B. Elimination of In -Lieu Fee Option Could Limit the City's Ability to Advance Other Affordable Housing Initiatives Also, the Council identified a desire to encourage units to be incorporated into the same project in which the remaining units would be built in order to ensure that there is less concentration of the City's affordable housing into just one area, e.g., the Tustin Legacy. As a result, the Council directed that the ordinance be revised to eliminate alternatives to building the units on-site with each project. However, in City staffs analysis, allowing an in -lieu fee alternative also provides the City with a funding source to implement affordable housing programs and projects throughout the City, not just in the Tustin Legacy area. In addition, the requirement to build affordable units within a for -sale project will discourage the development of ownership housing. It is very unlikely ownership housing will be built in Specific Plan Areas with a Residential Allocation Reservation; the gap between the cost of constructing the affordable units and the return on the added market rate residential units could be too extreme to justify the investment, even with the added value of RAR residential units. Finally, the original direction from the City Council at the 2016 Strategic Planning Workshop was to encourage on-site affordable rental units, which the Council's June 191n direction is accomplishing, but to require ownership housing to pay an in -lieu fee. The guidance against affordable ownership housing was driven by concerns about the huge subsidies that are required in developing affordable ownership units as opposed to affordable rental units and the Tustin Housing Authority's significant administrative costs associated with administering and monitoring affordable ownership units. C. Alternatives for the Council's Consideration As a result of those factors, Staff is providing the City Council with the proposed Ordinance in a manner that conforms to the Council's June 19th direction (see Exhibit A, the Ordinance enumerated No. 1491 A), but also is attaching several alternatives for the Council consideration. The alternative attached as Exhibit B (Ordinance enumerated No. 1491 B) would, for instance, provide small projects of less than 20 units with greater flexibility to address the affordability requirements by reinstating the alternative options of paying an in -lieu fee, constructing affordable units off-site, dedicating land, or providing an alternative deemed acceptable by the City. The alternative attached as Exhibit C (Ordinance enumerated No. 1491C) would build on the flexibility identified in Exhibit B for smaller projects by authorizing one additional new alternative to both small (less than 20 units) and larger projects: the option of constructing 5% of the base units for very -low income households or 10% of the base units for low income households on-site in the residential project coupled with an in -lieu fee for half (50%) of the base units. In building 5% of the base units for very -low income 1327491.1 Agenda Report July 3, 2018 Page 4 households or 10% of the base units for low income households, the developer would also qualify for a density bonus. This approach would ensure that many of the affordable units would be constructed in the specific plan areas where RARs are available but also provide the City with funds to pursue City affordable housing programs and projects. Finally, the alternative attached as Exhibit D (Ordinance enumerated No. 1491 D) is the version of the ordinance that was presented for the Council's consideration at the meetings on June 5th and June 19th. This version would apply not only to projects that voluntarily receive RAR units but also to projects that benefit from rezoning to residential zoning, or that are up -zoned to allow greater residential density. In addition, Exhibit D includes significant flexibility of alternatives for all projects, small and large, to address the affordability requirements, including in -lieu fees, land dedication, off-site construction of required units, or providing an alternative deemed acceptable to the City. (This version did not expressly include the "50/50 alternative" that would allow half of the affordability to be addressed with in -lieu fees as long as at least half is addressed through on-site construction of affordable units.) The chart on the following page is provided to assist the Council in understanding the differences among the four versions of the proposed ordinance that Staff is attaching. 1327491.1 Agenda Report July 3, 2018 Page 5 Summary of Voluntary Workforce Housing Ordinance Alternatives Proposed Developments the Options for Projects Options for Projects Ordinance Ordinance Version under 20 units 20 units and over: Version: Applies to: 1491A Only to projects that Construct all required Construct all required utilize a Residential affordable units onsite. affordable units onsite. (Council Allocation Reservation Requested) 1491B Only to projects that i. Construct all required Construct all required utilize a Residential affordable units onsite; affordable units onsite. Allocation Reservation 2. Construct some or all affordable units off-site; 3. Pay in -lieu fee; or 4. Other alternative determined acceptable to the City (e.g., dedicate land). 1491C Only to projects that 1. Construct all required i. Construct all required utilize a Residential affordable units onsite; affordable units onsite; or (Staff Allocation Reservation 2. Construct some or all 2. Construct 5% of the Recommended) affordable units off-site; base units for very -low 3. Pay in -lieu fee; income households or io% or of the base units for low 4. Other alternative income households on-site determined acceptable to in the residential project the City (e.g., dedicate and pay an in -lieu fee for land); half (50%) of the base 5. Construct 5% of the base units. units for very -low income (Note: under option 2, households or io% of the developer would qualify base units for low income for a density bonus) households on-site in the residential project and pay an in -lieu fee for half (50%) of the base units. (Note: under option 5, developer would qualify for a density bonus) i49iD Projects that (1) utilize a 1. Construct all required i. Construct all required Residential Allocation affordable units onsite; affordable units onsite; (Prior version Reservation; (2) rezone 2. Construct some or all 2. Construct some or all of proposed property to residential; affordable units off-site; affordable units off-site; ordinance) or (3) change zoning 3. Pay in -lieu fee; or 3. Pay in -lieu fee; or from lower density 4. Other alternative 4. Other alternative residential to higher- determined acceptable to determined acceptable to density residential. the City (e.g., dedicate the City (e.g., dedicate land). land). 1327491.1 Agenda Report July 3, 2018 Page 6 STAFF'S RECOMMENDATION In order to address the concerns about the effect of requiring on-site construction on smaller projects of less than 20 units, and to provide the City with greater financial flexibility to implement City affordable housing programs and projects, City Staff recommends that the Council introduce and conduct first reading by title only of the proposed ordinance attached as Exhibit C, and enumerated as Ordinance 1491C. This version of the ordinance would provide projects of less than 20 units with more options to address the affordability requirements, and would afford all projects, large and small, that elect to receive Residential Allocation Reservations the flexibility to provide up to half of the affordability requirements through payment of an in -lieu fee. Finally, it should be noted that because the ordinance exempts projects for which an application is deemed complete as of the effective date of the ordinance, and because the ordinance as revised only applies to Specific Plan areas in which an RAR is available and no such Specific Plans have yet been adopted, there will be no projects that will receive RARs that will be "grandfathered in" under the ordinance. However, under the recommended ordinance, any projects that do not include a voluntary request for an RAR will not be required to comply with the ordinance in any case. PUBLIC NOTICE: A public notice was published in the Irvine World News on May 24, 2018, informing the public of the proposal to adopt an ordinance to establish a workforce housing incentive program. CONCLUSION: The proposed ordinance is a tool for providing more affordable housing, geographically distributing, and addressing regional housing requirements mandated by SCAG. CTJohBuchanan �c� w of Economic Developm Attachments: A. Draft Ordinance No. 1491A B. Draft Ordinance No. 1491 B C. Draft Ordinance No. 1491 C D. Draft Ordinance No. 1491 D 1327491.1 Jerry Craig Deputy Dire or of c is Development